Understanding how teachers are paid

This page discusses teacher salary schedules and their impact on school district budgets. Whether teachers are underpaid, paid adequately or overpaid may be debated endlessly. The purpose here is only to clarify how they are paid, and how contract decisions on their salaries affect school personnel costs. In this context the term "teacher" should be understood to include all non-administrative professionals covered by a district’s contract with a union. This category includes not only teachers, but counselors, librarians, school nurses and other professional employees.)

The salaries of teachers in a bargaining unit typically account for 35-40% of a school district's total costs -- the largest single item within a school budget. The pay of teachers depends primarily on seniority – that is, on the number of years spent in teaching. Graduate credits and degrees also affect pay but to a lesser extent. The value of the added degree also increases with seniority.

A sample salary schedule

A salary schedule, sometimes referred to as a “pay ladder,” is a matrix that shows how teachers’ salaries increase as a function of years spent in teaching and the degrees or graduate credits earned.

The intervals between salary levels are known as “steps,” and the number of steps in a schedule determines how fast a teacher can move from the bottom to the top of a pay scale. A salary schedule in Pennsylvania may have as few as 10 and as many as 30 such steps, but most have some number between 15 and 20. The usual time interval between steps is one year, but exceptions are common.

How salary schedules affect individual teachers’ pay

To understand how much individual teachers will earn in a given district requires knowing where they are on the salary schedule. Unless a teacher is already at the top of the district pay scale, his or her pay increases will depend on two factors: (1) seniority based-step advancement and (2) whatever increases are added the value of each step.

The table below shows a simplified version of a salary schedule (and the impact of step movement over the term of a new, five-year contract) in an imaginary school district where the starting salary is now $40,000 and the maximum salary (assuming no new college credits) is $60,000 for teachers with 20 years of experience (but no additional college credits). The new contract provides for annual step increases of $1,000.

Five-year salary schedule (bachelor’s degree only)

Base (2008-09)

Y1 (09-10)

Y2 (10-11)

Y3 (11-12)

Y4 (12-13)

Y5 (13-14)

1

$40,000

$41,000

$42,000

$43,000

$44,000

$45,000

2

$41,000

$42,000

$43,000

$44,000

$45,000

$46,000

3

$42,000

$43,000

$44,000

$45,000

$46,000

$47,000

4

$43,000

$44,000

$45,000

$46,000

$47,000

$48,000

5

$44,000

$45,000

$46,000

$47,000

$48,000

$49,000

6

$45,000

$46,000

$47,000

$48,000

$49,000

$50,000

7-19

omitted

...

...

...

...

...

20

$60,000

$61,000

$62,000

$63,000

$64,000

$65,000

Under the terms of this contract, the starting salary for a teacher hired at Step 1 five years from now would rise to $45,000, a modest increase of about 2.5% per year. However, a teacher who had been at Step 1 during the year when the new contract was negotiated will be at Step 6 during the fifth and final year of the new contract. And Step 6 will by then be worth $50,000, so that the teacher's salary will have increased by 5% annually. (This assumes no added increase due to an advanced degree or other non-seniority factor.) For a teacher already at the top of this hypothetical pay scale, the only pay increase would be the increased value of Step 20 (from $60,000 to $65,000).

Salary steps as a negotiating issue

Teachers have an obvious financial interest both in the highest salary level they can reach and in how quickly they can get there. Therefore, the number of steps in a salary schedule and the time intervals between steps are negotiable issues. According to long-time observers of board-union bargaining, the first salary schedules negotiated under Act 195 of 1970 tended to have 30-year steps – one for each year until most teachers were expected to be near retirement. As noted, most contracts now tend to have fewer than 20 steps. A goal of the Pennsylvania State Education Association (PSEA) is limit the number of steps in salary schedules so that all teachers move to the highest pay levels rapidly.[1]

Adjustments to salary schedules provide opportunities for negotiators on both sides of the table to keep the costs of a contract within agreed-upon bounds – at least during the contract period. For example, a board may offer what it considers a large pay increase in exchange for a step freeze, which postpones the effect of step movement on the budget. Or a union may offer to accept what it considers a small overall percentage increase in exchange for step compaction – reducing the number of steps and hence increasing teachers’ lifetime earnings by increasing the number of years they spend at the top of their pay scales. The PSEA discourages local unions from entering into these kinds of agreements.[2]

Unions also oppose either merit pay or skills-based pay (paying more to teachers with scarce skills, such as the ability to teach calculus or work with autistic children). They defend seniority-based salary schedules as a fair way to reward years of service. They also suggest that teaching experience is likely to be closely correlated with teaching ability. From that perspective, seniority-based pay can be viewed as compensating experienced teachers for their role as mentors for less experienced teachers, even if that role has not been formalized. It is also argued that proposals for merit pay must either be based on unrealistic formulas or else will be abused by administrators. School boards rarely make either merit pay or market-based pay part of a negotiations proposal.

Because reporters cannot be expected to understand these issues any better than most of the general public, newspaper summaries of cross-district comparisons may be misleading. For example, a union local may claim that its teachers are underpaid relative to those in neighboring districts, failing to mention that its teachers move rapidly up a compact salary schedule. Similarly, a board may claim that its teachers are highly paid relative to those nearby, failing to mention that the district's salary schedule slows the progress of teachers toward the district's highest pay levels.

The relevance of salary comparisons across school districts, as compared to other local salary levels, is a legitimate subject for debate. Assuming for the sake of the argument that cross-district salary comparisons are important, the least biased basis for comparison is how a proposed schedule would determine the total career earnings of teachers if it were to remain in force over a long period. For example, consider two districts where, in each district, entry-level pay is $40,000 and top-level pay is $60,000. If teachers move to the top of the scale in District A in 20 steps, pay over a 30-year career would total $1,600,000 (20 years at an average of $50,000, plus 10 years at $60,000). If District B has only 10 steps, the pay would be $1,700,000 (10 years at an average of $50,000 and 20 years at $60,000). (Since the numbers involve comparisons between two districts over identical time periods, there is no need to take inflation into account.)

How salary schedules affect school budgets

The number of teachers at different points on a district’s salary schedule can be used to project district’s personnel costs in future years. For example, if a high percentage of a district’s teachers are already at top step, the district may be able to capture attritional savings due to the retirement of higher-paid teachers and their replacement with lower-paid ones. These savings are apt to be short-lived, however. A board that puts these attritional savings back into its schedule in the form of relatively high percentage increases in the value of each step will soon find its total costs rising sharply.

For example, in the hypothetical district whose pay scale ranges across 20 steps from $40,000 to $60,000, the district will pay an average of $50,000 per teacher if teachers are evenly distributed across the schedule. If most teachers are at the high end of the pay scale, average salary costs will be higher in any given year than if most teachers were at the lower end.

On hearing terms like “a 4% pay increase,” reporters and citizens need to know whether the stated percentage includes the value of seniority-based step movement. When the number is qualified by a phrase like, “exclusive of step,” the total costs to the district will almost certainly be higher than the stated percentage. (An unlikely exception would occur if all teachers were already at the top of the pay scale and no younger teachers were hired during a contract period, so that step increases would cease matter.)

Salary schedules also take into account the effect of graduate degrees and credits, ignored in the previous examples. Because the cost of acquiring graduate credits are usually covered by taxpayers, it is very likely that a teacher at Step 1 when the preceding hypothetical contract was negotiated would within five years earn a master’s degree or at least enough additional credits to qualify for "lateral movement" across the salary schedule. As a result, he or she would probably be earning the salary of a "Master's, Step 6" and “Bachelor’s, Step 6.”

In order to account for both seniority and applicable graduate credits, salary scheduled are highly detailed, like the following one from an affluent Pennsylvania school district (atypical in that it shows only 11 steps).

Use of salary schedules in long-term projections

Neither boards nor unions can know for sure how many teachers will retire, how many will earn enough graduate credits to move laterally across a salary matrix like the one shown in Fig. 1, or how many new teachers may be needed. Although experience provides a basis for estimates, the uncertainty of any projection of future costs and revenues increases over time. This means that contract duration may be an important negotiable issue. If a board is confident of the accuracy of its staffing projections, a five-year contract offers the appeal of eliminating the need to re-open negotiations in the near future. Personnel costs may nevertheless increase for unexpected reasons, such as an unexpected increase in he number or type of special-needs students. Similarly, revenues may drop because of declining enrollments, local economic misfortunes, or funding changes based on state-level political factors.

Because long-term contracts involve so much uncertainty, it was predicted that Act 1 of 2006 would lead to shorter contracts. Act 1 limited the authority of local school boards to raise property taxes above a formula-based ceiling without a "back-end referendum," meaning a voter referendum whose outcome applies retroactively to the proposed tax increase being voted upon. A district whose voters reject a proposed tax increase may find itself obliged to honor a legally enforceable contract with its teacher union that it cannot pay for without making cuts somewhere else in its budget. At the end of 2008, however, the predicted impact of Act 1 on negotiations had seldom materialized.